Transcript Energy Security - The Swiss Global Economics

The U.S. Energy Briefing: Policy Options and Recomendations
April 28th.2011
Presentation Roadmap
Current Energy
Assessment
Inputs for
Policy Decisions
• Where is Demand Going? • Energy Independence
vs. Energy Security
• Constraints on Supply
meeting Demand
• National Interests
Options and
Recommendations
• Option 1: Domestic Drive
• Option 2: SEGB
• Implementation
• Trends Requiring
Clarification
• Vulnerabilities
• Objectives
• Evaluation and Fallback
Where is demand going?
Domestically:
– Transportation
• Increasing proportion and magnitude
– Industry
• Efficiency improvements reducing
proportion
Internationally:
– China and India
• Large population
• Economic growth
– Growth in demand around the world
• OECD – 60% of demand today
• And Non-OECD – 60% of demand in 2030
What are the constraints on supply meeting demand?
Domestically:
• Incomplete access – Alaska
• Trade restrictions – Biofuels from Brazil
• Environmental considerations – Nuclear
meltdown, CO2 emissions
• Reduced reserves – U.S. oil production has
peaked
Internationally:
• Lack of spare capacity – OPEC production is 6%
less than capacity
• Lack of refineries – built for certain types of
crude oil, in order to produce certain types of
petroleum products
• Lack of investment – should be overcome by
higher oil prices?
3500
3000
2500
2000
1500
1000
500
0
U.S. Crude Oil Estimated
Production from Reserves
(Million Barrels)
What Trends Require Clarification?
• Energy decisions are necessarily long-term
• Efficiency vs. Conservation
• Fossil fuels greatly more significant than renewables
• Sufficient oil reserves for at least up to 2050
• One world energy market
• Energy is more than oil, but …
Specific vulnerabilities that the U.S. should address
Domestically:
• Where does US oil come from?
• Infrastructure – awareness after Katrina
Internationally:
• Terrorism – increased reliance on insecure
areas
– Niger Delta, Russia, Middle East
• Transportation routes
• Lack of diversification
– Locations and sources of energy
• Information
– Oil projections?
• Lack of investment – failure of NOCs
• Chinese mercantilism
Largest U.S. oil imports by country (2006)
Country
000s barrels /day
Canada
1,944
Saudi Arabia
1,479
Mexico
1,198
Nigeria
1,163
Venezuela
1,135
Oil Transportation Chokepoints
Bosporus Strait
2.4 million b/d
Strait of Hormuz
17 million b/d
Strait of Malacca
Suez Canal
15 million b/d
4.5 million b/d
Bab el-Mandab
3.3 million b/d
Energy Independence vs. Energy Security
• Energy Independence:
– Producing sufficient energy domestically to meet domestic demand (i.e. zero
imports of energy)
– Is it actually possible?
• Maybe only with nuclear power, development of Canadian tar sands
– Can we follow Brazil?
• No – biofuels are inappropriate, little chance of more oil discoveries
• Energy Security:
– Availability, affordability, adequacy, reliability of energy resources
• Moderating demand, expanding and diversifying supply (including
alternatives), strengthening global energy trade and investment
National Interests
Vital
• Ensure the viability and stability of major global systems
(trade, financial markets, supplies of energy)
• Prevent, deter, and reduce the threat of the use of nuclear
weapons anywhere
Extremely Important
• Support our strategic partners in the Middle East and
around the world
Important
• Reduce detrimental effects of Climate Change on U.S.
mainland
Objectives
What are the main U.S. Energy Objectives?
• Energy Security
–
–
–
–
–
Diversification of types and sources
Energy efficiency
Energy conservation
Increased energy investment
Open markets and increased access
• Reduce the threat of nuclear weapons
proliferation
– Safe and secure nuclear facilities around the world
• Climate change mitigation
– Reduced CO2 emissions
Option 1: Domestic Drive
• Assumptions:
– U.S. is in a better position to control its destiny
– International cooperation encounters too much bureaucracy
– Likelihood of
increased international turmoil in the future
• New energy types – increased nuclear power, renewables
Domestic Energy
Supply
• Infrastructural development – additional pipelines, reserves
• Improved access to reserves – opening up of ANWR
Domestic Energy
Demand
• Efficiency and conservation advances
– Subsidies for efficiency improvements in homes and business
– Stricter CAFE standards and tighter energy controls of industry, tighter
building codes
– Cap-and-trade system of CO2 emissions for industry
• Increased public transportation, increased tax on gasoline
Wider environment
• Federal support of R&D into new technologies (carbon sequestration and fusion)
• Increased sponsorship of geophysical programs at U.S. universities
• Development of renewable energy sources when at least marginally cost effective
Option 1: Domestic Drive
Pros:
– America’s demand as a global percentage is high, efficiency improvements will
have an effect on global statistics
– More likely to lead to long-term success
– Could be used as a model for the international community
– Protects U.S. industry
– America will be more secured in the event of international turmoil
Cons:
– May be unpopular with American citizens and businesses
– Ecological damage if Alaska is opened up to oil prospectors
– Gasoline taxes may harm economic growth in the short-term
Option 2: Supranational Energy
Governing Body (SEGB)
Assumptions:
– Meaningful action possible only through international cooperation
– Sovereignty issues will restrict role to free market policy promotion, centers
of research, and some international policing
Organization
• Includes existing bodies (IEA, IAEA, and OPEC), all states will be invited to join
• States must be committed to basic tenets (efficiency, diversification, free trade)
Free Market Policy
• Reduce energy trade barriers – ineffective and inefficient
• Encourage governments to sell oil above production cost
• Global cap-and-trade CO2 emission system
• Global strategic petroleum reserves in case of supply shocks
International
Policing
• Multinational force will guard maritime transport chokepoints
• Global monitoring and surveillance of pipe-lines, other potential terrorist targets
• SEGB to mediate on energy-policy disputes (e.g. Ukraine-Russia)
Research and
Technology
• Body will fund multi-national research programs (CERN, other locations)
• Technology transfer of efficiency improvements to developing world
• SEGB will have access to all reserves for surveying purposes
Output
Improvements
• SEGB takes control of marginal field when oil companies want to pull out
• SEGB funds EOR projects (Enhanced Oil Recovery) when non-profitable for firms
Recommendation
Objective
Amount of Change
Option 1
Option 2
Increased diversification of sources
3/10
5/10
Improved energy efficiency
4/10
5/10
Improved energy conservation
3/10
8/10
Increased investment
4/10
4/10
Opening up of markets
3/10
8/10
Reduce threat of nuclear-weapons
proliferation
2/10
7/10
Reduce CO2 emissions and effects of
climate change
4/10
8/10
Probability of Success
80%
40%
 Recommendation: Option Two: International Cooperation
Implementation
• Initial summit meeting of SEGB:
–
–
–
Define specific goals
Decide initial membership criteria
Invite Heads of States of all nations
• Identify contributors to the multinational maritime
guard
–
Locate bases for coast-guard vessels, terms of engagement
• Discussion of mandates between IEA, IAEA and SEGB
–
–
Ensure there is responsibility for all areas of energy security
Discussion of merger strategy between various bodies
• Commence SEGB geological survey of existing oil fields
• Commence discussion on cap-and-trade endowments
Evaluation and Fallback
• Predetermined timetable of efficiency and supply
improvements
– Annual evaluation of whether targets are being reached
– Focus on which states are not meeting targets – additional
programs/subsidies/penalties
• Resolution of international energy disputes and
increased access
Fallback:
– If initially unpopular, SEGB could be restricted to G8+2 (China and India) and main
energy exporters (including OPEC)
– If SEGB ineffective, option one remains a fallback possibility